UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
    THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SEPTEMBER 30, 2006
                              -------------------

                                       Or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
    THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to _________________

Commission File No. 0-8693
                    ----------------------


                              TRANSNET CORPORATION
                              --------------------
             (Exact name of registrant as specified in its charter)


          DELAWARE                                      22-1892295
--------------------------------            ------------------------------------
(State or other jurisdiction of             (IRS Employer Identification Number)
incorporation or organization)

45 Columbia Road, Somerville, New Jersey                     08876-3576
----------------------------------------                --------------------
(Address of principal executive offices)                      (Zip Code)

Registrant's Telephone Number, Including Area Code:         908-253-0500
                                                            ------------

--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last Report

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No _____

Indicate by check mark whether the registrant is an accelerated filed (as
defined in Rule 12b-2 of the Exchange Act) Yes _____ No __X__

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 10, 2006: 4,823,304.


<PAGE>


                              TRANSNET CORPORATION
                              --------------------
                                    FORM 10-Q
                                    ---------

                                TABLE OF CONTENTS
                                -----------------

                                                                      Page No.
                                                                      --------
PART I.  FINANCIAL INFORMATION
------------------------------

         Consolidated Balance Sheets
                  September 30, 2006 (unaudited) and June 30, 2006       1


         Consolidated Statements of Operations (unaudited)
                  Three Months Ended September 30, 2006 and 2005         2


         Consolidated Statements of Cash Flows (unaudited)
                  Three Months Ended September 30, 2006 and 2005         3


         Notes to Consolidated Financial Statements                      4


     Item 2.  Management's Discussion and Analysis                       8


     Item 4.  Controls and Procedures                                   13


PART II.  OTHER INFORMATION
---------------------------


     Item 6.  Exhibits and Reports on Form 8-K                          14


     Signatures                                                         14
     Certifications                                                     15


                                       i.

<PAGE>


                       TRANSNET CORPORATION AND SUBSIDIARY
                       -----------------------------------
                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------

                                            September 30,        June 30,
                                                2006               2006
                                            --------------     -------------
                                             (unaudited)
ASSETS:
CURRENT ASSETS
Cash and Cash Equivalents                     $  2,817,533     $  4,034,495
Accounts Receivable - Net                        5,383,705        3,438,526
Inventories                                        766,094        1,501,695
Other Current Assets                               137,311           70,013
Deferred Tax Asset                                 133,941          133,941
                                              ------------     ------------

TOTAL CURRENT ASSETS                          $  9,238,584     $  9,178,670

PROPERTY AND EQUIPMENT - NET                       515,581          563,543

OTHER ASSETS                                       280,646          280,035
                                              ------------     ------------

TOTAL ASSETS                                  $ 10,034,811     $ 10,022,248
                                              ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts Payable                              $    443,067     $     89,465
Accrued Expenses                                   303,549          316,662
Income Taxes Payable                                 2,619            9,611
Floor Plan Payable                                 292,843          621,507
                                              ------------     ------------
TOTAL CURRENT LIABILITIES                     $  1,042,078     $  1,037,245

DEFERRED TAX LIABILITY                              47,470           47,470

COMMITMENT AND CONTINGENCIES                            --               --

STOCKHOLDERS' EQUITY:

Capital Stock - Common, $.01 Par Value,
Authorized 15,000,000 Shares;
Issued 7,408,524 at September 30, 2006
and June 30, 2006 [of which
2,585,220 are in Treasury at September 30,
2006 and June 30, 2006]                             74,085           74,085

Paid-in Capital                                 10,574,670       10,574,670

Retained Earnings                                5,449,343        5,441,613
                                              ------------     ------------

Totals                                          16,098,098       16,090,368
Less: Treasury Stock - At Cost                  (7,152,835)      (7,152,835)
                                              ------------     ------------

TOTAL STOCKHOLDERS' EQUITY                       8,945,263        8,937,533
                                              ------------     ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $ 10,034,811     $ 10,022,248
                                              ============     ============

See Notes to Consolidated Financial Statements.


                                                                               1

<PAGE>


                       TRANSNET CORPORATION AND SUBSIDIARY
                       -----------------------------------
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
                                   (UNAUDITED)
                                   -----------

                                            THREE MONTHS ENDED SEPTEMBER 30,
                                            --------------------------------
                                                  2006             2005
                                                  ----             ----
                                               (unaudited)
REVENUE
Equipment                                      $ 5,008,754     $ 7,298,903
Services                                         3,362,568       3,782,956
                                               -----------     -----------

Total Revenue:                                   8,371,322      11,081,859
                                               -----------     -----------

COST OF REVENUE
Equipment                                        4,356,160       6,588,346
Services                                         2,413,839       2,628,497
                                               -----------     -----------

Total Cost of Revenue                            6,769,999       9,216,843
                                               -----------     -----------

Gross Profit                                     1,601,323       1,865,016

Selling, General and Administrative Expenses     1,615,922       1,759,246
                                               -----------     -----------

Operating Income                                   (14,599)        105,770
                                               -----------     -----------

OTHER INCOME:
Interest Income                                     22,329          13,141
Loss On Disposal of Asset                               --              --
                                               -----------     -----------

Income Before Tax Expense                            7,730         118,911

Income Tax (Benefit)                                    --          40,430
                                               -----------     -----------
Net Income                                     $     7,730     $    78,481
                                               ===========     ===========
Basic Net Income Per Common Share              $      0.00     $      0.02
                                               ===========     ===========
Diluted Net Income Per Common Share            $      0.00     $      0.02
                                               ===========     ===========


Weighted Average Common Shares
Outstanding - Basic                              4,823,304       4,823,304
                                               ===========     ===========


Weighted Average Common Shares
Outstanding - Diluted                            4,913,328       4,936,033
                                               ===========     ===========


See Notes to Consolidated Financial Statements.


                                                                               2

<PAGE>


                      TRANSNET CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                   -----------

                                             THREE MONTHS ENDED SEPTEMBER 30,
                                             --------------------------------
                                                   2006            2005
                                                   ----            ----
OPERATING ACTIVITIES:
Net Income                                     $     7,730     $    78,481
                                               -----------     -----------
Adjustments to Reconcile Net Income to
  Net Cash:
Depreciation and Amortization                       51,258          60,135
Provision for Doubtful Accounts                     15,000          15,000
Deferred Tax Benefit                                    --          46,509
Inventory Reserve Adjustment                        12,000          12,000

Changes in Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable                             (1,960,181)     (3,690,281)
Inventory                                          723,601        (936,216)
Other Current Assets                               (67,298)        (83,030)
Other Assets                                          (860)         (1,143)

Increase (Decrease) in:
Accounts Payable and Accrued Expenses              340,490       1,119,400
Income Tax Payable                                  (6,992)             --
                                               -----------     -----------

Total Adjustments                              $  (892,982)    $(3,457,626)
                                               -----------     -----------

NET CASH - OPERATING ACTIVITIES - FORWARD      $  (885,252)    $(3,379,145)
                                               -----------     -----------

INVESTING ACTIVITIES:
Capital Expenditures                           $    (3,046)    $    (2,424)
                                               -----------     -----------

NET CASE - INVESTING ACTIVITIES                $    (3,046)    $    (2,424)
                                               -----------     -----------

FINANCING ACTIVITIES -
Floor Plan Payable - Net                       $  (328,664)    $  (522,512)
                                               -----------     -----------

NET CASH - FINANCING ACTIVITIES                $  (328,664)    $  (522,512)
                                               -----------     -----------

NET (DECREASE) INCREASE IN CASH AND
  CASH EQUIVALENTS                             $(1,216,962)    $(3,904,081)

CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIODS                                   $ 4,034,495     $ 5,752,404
                                               -----------     -----------

CASH AND CASH EQUIVALENTS AT END OF PERIODS    $ 2,817,533     $ 1,848,323
                                               -----------     -----------

Supplemental Disclosures of Cash Flow
  Information:
Cash paid during the period for:
Interest                                       $         0     $         0
Income Taxes                                   $         0     $         0

See Notes to Consolidated Financial Statements


                                                                               3

<PAGE>


                       TRANSNET CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

(1.) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       (a) Consolidation: The consolidated financial statements include the
       accounts of the Corporation and its wholly owned subsidiary, Century
       American Corporation. Intercompany transactions and accounts have been
       eliminated in consolidation.

       (b) Inventory: Inventory consists of finished goods. The Corporation's
       inventory is valued at the lower of cost (determined on the average cost
       basis) or market.

       (c) Cash and Cash Equivalents: For the purposes of the statement of cash
       flows, the Corporation considers highly liquid debt instruments,
       purchased with a maturity of three months or less, to be cash
       equivalents.

       (d) Earnings Per Share: Earnings per common share - basic are based on
       4,823,304 weighted shares outstanding for the three months ended
       September 30, 2006 and 2005, respectively. Diluted are based on 4,913,328
       and 4,936,033 weighted shares outstanding for the three months ended
       September 30, 2006 and 2005, respectively.

       (e) In the opinion of management, the accompanying unaudited consolidated
       financial statements contain all adjustments consisting only of normal
       recurring adjustments necessary to present fairly the financial position,
       the results of operations and cash flows for the periods presented.

       (f) These statements should be read in conjunction with the summary of
       significant accounting policies and notes contained in the Corporation's
       annual report on Form 10-K for the year ended June 30, 2006.

       (g) The results of operations for the three months ended September 30,
       2006 are not necessarily indicative of the results to be expected for the
       entire year.

       (h) New Accounting Pronouncements:

                  In December 2004, the FASB issued SFAS No. 123R (Revised 2005)
                  "Share-Based Payment." The statement requires that the
                  compensation cost relating to share-based payment transactions
                  be recognized in financial statements. That cost will be
                  measured based on the fair value of the equity or liability
                  instrument issued. The statement covers a wide range of
                  share-based compensation arrangements including share options,
                  restricted share plans, performance-based awards, share
                  appreciation rights, and employee share purchase plans. The
                  Company has adopted the requirements contained in this
                  statement, the effects of which are reflected in the financial
                  statements for this quarter. The Company was required to adopt
                  SFAS 123 (R) as of July 1, 2006.

                  In March 2005, the FASB issued Interpretation No. 47 (FIN 47)
                  "Accounting for Conditional Asset Retirement Obligations,"
                  which refers to a legal obligation to perform an asset
                  retirement activity in which the timing or method of
                  settlement are conditional on a future event that may or may
                  not be within the control of the entity. A liability must be
                  recognized for such an obligation (e.g. major clean-up


                                                                               4

<PAGE>


                  costs under a leasehold) when incurred if the liability's fair
                  value can reasonably be estimated. The adoption of this
                  statement is required for fiscal years beginning after
                  December 15, 2005. The adoption of this statement is not
                  expected to have a material impact on the consolidated
                  financial statements of the Company.

                  In May 2005, the FASB issued SFAS No. 154 "Accounting Changes
                  and Error Corrections". This Statement replaces APB Opinion
                  No. 20, Accounting Changes, and FASB Statement No. 3,
                  "Reporting Accounting Changes in Interim Financial
                  Statements", and changes the requirements for the accounting
                  for and reporting of a change in accounting principle. This
                  Statement applies to all voluntary changes in accounting
                  principle. It also applies to changes required by an
                  accounting pronouncement in the unusual instance that the
                  pronouncement does not include specific transition provisions.
                  When a pronouncement includes specific transition provisions,
                  those provisions should be followed. Adoption of this
                  statement is required for fiscal years starting after December
                  15, 2005. The Company has adopted the requirements contained
                  in this statement, the effects of which are reflected in the
                  financial statements. The adoption of this statement is not
                  expected to have a material impact on the consolidated
                  financial statements of the Company.

                  In February 2006, the FASB issued SFAS No. 155 "Accounting for
                  Certain Hybrid Financial Instruments (as amended)". This
                  Statement amends FASB Statements No. 133, Accounting for
                  Derivative Instruments and Hedging Activities, and No. 140,
                  Accounting for Transfers and Servicing of Financial Assets and
                  Extinguishment of liabilities, and, resolves issues addressed
                  in Statement No. 133 Implementation Issue No. D1, "Application
                  of Statement No. 133 to Beneficial Interests in Securitized
                  Financial Assets". This Statement requires the evaluation of
                  interest securitized financial assets to identify interests
                  that are freestanding derivatives or that are hybrid financial
                  instruments that contain an embedded derivative requiring
                  bifurcation. This Statement clarifies that embedded
                  derivatives do not include concentrations of credit risk in
                  the form subordination and further clarifies the accounting
                  for interest-only and principal-only strips. This statement
                  also eliminates the prohibition on a qualifying
                  special-purpose entity from holding a derivative financial
                  instrument that pertains to a beneficial interest other than
                  another derivative financial instrument. Lastly, this
                  statement permits fair value measurement for any hybrid
                  financial instrument that contains an embedded derivative that
                  would otherwise require bifurcation. The adoption of this
                  Statement is effective for financial statements with fiscal
                  years beginning or after September 15, 2006, or for all
                  financial instruments acquired or issued beginning on or after
                  September 15, 2006. The adoption of this statement is not
                  expected to have a material impact on the consolidated
                  financial statements of the Company.

                  In March, 2006, the FASB issued SFAS No. 156, "Accounting for
                  Servicing of Financial Assets-An Amendment of FASB Statement
                  No. 140". This Statement amends FASB Statement No. 140
                  "Accounting for Transfers and Servicing of Financial Assets
                  and Extinguishments of Liabilities," with respect to the
                  accounting for separately recognized servicing assets and
                  servicing liabilities. This Statement requires the recognition
                  of a servicing asset or liability initially measured at fair
                  value, for every obligation incurred for contracts to service
                  financial assets in certain sales-type transfers, qualifying
                  special purpose entity transfers, or in certain acquisitions
                  that do not relate to the financial servicer or its
                  consolidated affiliates. This Statement permits the choice of
                  either the


                                                                               5

<PAGE>


                  amortization method or the fair value method for each class of
                  separately recognized servicing assets and servicing
                  liabilities, and, requires separate disclosure at fair value
                  in the statement of financial position. The adoption of this
                  Statement is effective for financial statements beginning with
                  fiscal years on or after September 15, 2006. The adoption of
                  this statement is not expected to have a material impact on
                  the consolidated financial statements of the Company.

                  In June, 2006, the FASB issued FIN No. 48, "Accounting For
                  Uncertainty in Income Taxes - An Interpretation of FASB
                  Statement No. 109 Accounting For Income Taxes". This
                  interpretation requires a recognition threshold and
                  measurement attribute for the financial statement recognition
                  and measurement of a tax position taken or expected to be
                  taken in a tax return. This interpretation also provides
                  guidance on derecognition, classification, interest,
                  penalties, accounting in interim periods, disclosure and
                  transition. This interpretation requires the evaluation of
                  whether the technical merits of a tax position is more likely
                  or not to be sustained upon examination, including the
                  resolution of any related appeals or litigation. The Statement
                  requires the measurement of the largest amount of benefit that
                  is greater than a 50% likelihood of being realized upon final
                  settlement, presuming the position will be examined by the
                  appropriate taxing authority with the benefit of full
                  knowledge and relevant information. The adoption of this
                  interpretation is effective for fiscal years beginning after
                  December 15, 2006.

                  In September, 2006, the FASB issued SFAS No. 157, "Fair Value
                  Measurements". This Statement defines fair value as 'exit
                  prices' NOT 'entry prices' in generally accepted accounting
                  principles (GAAP), and expands disclosures about fair value
                  measurements for the purpose of promoting consistency and
                  simplification of the existing codification of accounting
                  principles. To eliminate differences in practice and reduce
                  complexity in the application of GAAP, the Statement
                  emphasizes that fair value is a market-based measurement, not
                  an entity specific measurement and should be determined based
                  on the assumptions that market participants would use in
                  pricing the asset or liability. This statement establishes a
                  fair value hierarchy that distinguishes between observable and
                  unobservable inputs and clarifies the need for adjustments to
                  fair value based on nonperformance, and other market risk
                  assessment criteria, certain asset or event restrictions, and
                  trading blockage. The adoption of this Statement is effective
                  for financial statements beginning with fiscal years on or
                  after September 15, 2007, including interim financial
                  statements within that fiscal year.

                  In October, 2006, the FASB issued SFAS No.158, "Employers'
                  Accounting for Defined Benefit Pension and other
                  Postretirement Plans-An amendment of FASB Statements No. 87,
                  88, 106 and 132(R)". This statement requires an employer to
                  recognize the overfunded or underfunded status of a defined
                  benefit postretirement plan, other than a multiemployer plan,
                  as an asset or liability in its statement of financial
                  position and to recognize changes in that funded status in the
                  year in which the changes occur through the comprehensive
                  income of a business entity. This statement requires the
                  measurement and recognition of the difference between plan
                  assets at fair value and the benefit obligation, as of the
                  date of the employer's fiscal year-end statement of financial
                  position. This statement also requires additional disclosure
                  in the footnotes to the financial statements about certain
                  effects on net periodic benefit cost for the next fiscal year
                  that arise from delayed recognition of the gains or losses,
                  prior service costs or credits, and transition


                                                                               6

<PAGE>


                  assets or obligations. Employers who have issued outstanding
                  publicly traded equity securities are required to adopt this
                  Statement by initially recognizing the funded status of a
                  defined benefit postretirement plan including the required
                  footnote disclosures as of the end of the fiscal year ending
                  after December 15, 2006.

       (i) At September 30, 2006, the Corporation had a stock-based employee
       compensation plan. The Corporation accounts for the plan under the
       measurement principals of APB Opinion No. 25, Accounting for Stock Issued
       to Employees, and related Interpretations. No stock-based employee
       compensation cost is reflected in net income, as all options granted
       under those plans had an exercise equal to the market value of the
       underlying common stock on the date of grant. The following tables
       illustrate the effect on net income and earnings per share if the
       Corporation had applied the fair value recognition provisions of FASB
       Statement No. 123 to stock based employee compensation.


                                                      THREE MONTHS ENDED
                                                         SEPTEMBER 30,
                                               ------------------------------
                                                 2 0 0 6             2 0 0 5
                                                 -------             -------

NET INCOME:
   As Reported                                 $     7,730        $    78,481

DEDUCT:
   Stock Based Employee Compensation Expense
   Determined under the Fair Value
     Based Method - Net of Tax                           0                  0
                                               -----------        -----------

   PRO FORMA NET INCOME                        $     7,730        $    78,481
                                               -----------        -----------

BASIC  EARNINGS PER SHARE:
   As Reported                                 $      0.00        $      0.02
   Pro-Forma                                   $      0.00        $      0.02

DILUTED [LOSS] EARNINGS PER SHARE:
   As Reported                                 $      0.00        $      0.02
   Pro-Forma                                   $      0.00        $      0.02



(2.) INCOME TAXES
       The Corporation has a deferred tax benefit of $133,941 and a deferred tax
       liability of $47,470 based upon temporary timing differences including
       inventory capitalization, allowance for doubtful accounts, vacation pay
       accruals and depreciation.


                                                                               7

<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS
---------------------

Revenues and earnings decreased in the quarter ended September 30, 2006 as
compared to the same quarter in the prior year, primarily due to an decrease in
equipment sales, primarily in the governmental and educational markets. Revenues
for the quarter ended September 30, 2006 were $8,371,322, a decrease from
$11,081,859 for the quarter ended September 30, 2005. Service revenues
(technical support, repair and maintenance, network integration and training)
for the first quarter of fiscal 2007 decreased slightly as compared to the same
period in fiscal 2006 as a result of decreased demand for certain of the
Corporation's legacy technical services and in conjunction with the re. For the
quarter ended September 30, 2006, the Corporation reported net income of $7,730
as compared with net income of $78,481 for the corresponding period in 2005.

As stated above, revenues declined in the first quarter of fiscal 2007 as
compared to the same quarter in fiscal 2006, in large part due to the slowdown
in purchases from state and municipal entities, and educational clients within
New Jersey. The reduction encompassed both hardware sales and service revenues.
The reduction in service revenues was also impacted by the reduced demand from a
past major customer, as discussed below. During the September 2006 quarter,
profit margins on equipment sales increased to 13% from 10% in the comparable
2005 quarter, as a result of the increased volume of sales of VoIP related
equipment, which carry higher profit margins. Gross profit margins on service
revenues decreased to 28% in the September 2006 quarter from 31% in the
comparable 2005 quarter as a result of the slowdown and the resulting decrease
in engineering utilization time. Management believes that the gross margins on
service revenues will increase in conjunction with increased utilization rates.

During the September 2006 quarter, the Corporation initiated new projects and
continued work on existing awards for IPC products and services. The performance
of these projects will extend over several quarters. Management notes that some
of these projects have been affected by construction delays beyond the
Corporation's control, and these delays have resulted in some order backlogs.
None of these delays have had any significant impact upon the operations of the
Corporation. During the 2006 and 2005 quarters, the Corporation's clients
continued to be conservative in their IT budgetary spending.

With respect to selling, general and administrative expenses, expenses for the
September 2006 quarter increased to 19% of revenues, as compared to
approximately 16% of revenues for the September 2005. The increase in this
percentage was the result of the reduction in revenues, noting that the actual
amount of expenses decreased. Management notes that these expenses include
salaries of highly skilled technical personnel, including engineering staff,
related to the sale and service of convergence of voice, video, and data
networks in the IPC marketplace. Management continues its efforts to control and
reduce administrative and personnel related costs.

Management continues its concentration on sales of sophisticated network and
system integration products which yield higher profit margins, and continues
adherence to and implementation of cost control measures. To maximize profit
margins, management consistently works to obtain the best discounts available to
it on hardware purchases from its distributors. Management also utilizes new
trends such as manufacturers' direct shipment and billing of the customers in
exchange for payment to the Corporation of an "agency fee" as a means to reduce
equipment related costs while increasing profits. Management believes that this
approach, although it may impact revenues,


                                                                               8

<PAGE>


insulates the corporation from challenges which may accompany sudden price
decreases, hardware obsolescence and delays in the collection of receivables.
These sales supplement sales through traditional channels, and are not a
material source of revenue.

During the last several years, the computer industry has experienced a trend of
decreasing prices of computers and related equipment. Management believes that
this trend will continue, but hopes to offset these decreases by expansion of
its IPC sales. Industrywide, the result of price erosion has been lower profit
margins on sales, which require businesses to sell a greater volume of equipment
to maintain past earning levels. Another result of the price decreases has been
intensified competition within the industry, including the consolidation of
businesses through merger or acquisition, the initiation of sales by many
manufacturers directly to the end-user, and the entrance of manufacturers into
technical services business. Management believes that the adoption of policies
by many larger corporate customers, which limit the number of vendors permitted
to provide goods and services for specified periods of time, has further
increased price competition.

As part of the industry competition pressures discussed herein, management
continues to see erosion in certain legacy business related to Fortune 500
customers as those customers enter into and/or expand business relationships
with large global partners. As part of this erosion, during fiscal 2006, the
Corporation's largest customer through fiscal 2005, a Fortune 500 company,
signed an agreement with a global support organization that encompassed some
lower margin work previously awarded to TransNet. While the Corporation still
has a presence at this client's locations, the amount of business from this
client was materially reduced. Although management believes that projects
performed during 2006 and fiscal 2007 to date replaced much of the reduced
business, and believes its focus on higher margin services related to VoIP/IP
Telephony and security will lead to continued growth and opportunities that will
help compensate for this reduction, no assurances can be given that the
Corporation will be able to replace the loss of a significant amount of legacy
business from this sector of its customer base, should that occur, or that
operations will not be adversely effected. In this regard, in addition to orders
and awards already received, indications of interest have been received by
existing and prospective clients with respect to VoIP/IP products and services
and security technology, areas which management has targeted as growth areas for
the Corporation. Although requests for quotations have increased in the past few
months and management is cautiously optimistic, assurances cannot be given that
all quotations will produce orders.

During the periods discussed, the IT industry as a whole was impacted by a
significant slowdown in client spending. Clients have begun to scrutinize their
IT spending and the related returns on investments before incurring new
expenses. Management believes that future spending will be subject to specific
criteria, but also believes that as single source provider, the Corporation will
be in a better position to satisfy client demands for cost-effectiveness and a
suitable return on investment. Service related revenues, a material segment of
revenues, are significant in their contributions to net income because these
operations yield a higher profit margin than equipment sales. For the fiscal
quarters discussed, revenue from the provision of service, support, outsourcing
and network integration was largely attributable to the Corporation's service
contracts with a number of corporate customers to provide service and support
for the customer's personal computers, peripherals and networks. Most of these
contracts are short-term, and contain provisions which permit early termination.
Although the contracts generally contain renewal terms, there is no assurance
that such renewals will occur.

With respect to certain support services, Management has noted a transition to
project-based business, in which services are rendered for a specific project,
such as a VoIP installation, rather than contract based business, in which
technical services are rendered for a specific period of time. Accordingly, the
Corporation must rely more upon projects as a source of revenues. Industry


                                                                               9

<PAGE>


changes have also diminished the demand for certain legacy support services,
such as help desk, as demand for services such as those related to VoIP systems
and call centers has increased. The Corporation has modified its service
offerings in response to these industry fluctuations, and has recruited
experienced systems engineers and project managers to respond to increased VoIP
projects. The Corporation has modified its service offerings, and is marketing
service contracts to provide remote monitoring services, and contracts which
allow for remote as well as on-site services. Remote monitoring and remedial
services allow for greater utilization of the Corporation's technical staff. In
addition, the Corporation has established a Support Call Center operating from
its Branchburg, New Jersey headquarters.

The Corporation's performance is also impacted by other factors, many of which
are not within its control. These factors include: the short-term nature of
client's commitments; patterns of capital spending by clients; the timing and
size of new projects; pricing changes in response to competitive factors; the
availability and related costs of qualified technical personnel; timing and
customer acceptance of new product and service offerings; trends in IT
outsourcing; product constraints; and industry and general economic conditions.

LIQUIDITY AND CAPITAL RESOURCES

There are no material commitments of the Corporation's capital resources.

The Corporation currently finances a portion of its accounts receivable and
finances purchases of portions of its inventory through floor-planning
arrangements under which such inventory secures the amount outstanding. Floor
planning payables decreased in the 2006 period compared to the same period in
2005 as the result of purchases conducted through other channels, including
direct from suppliers and manufacturers. Inventory decreased in the quarter
ended September 30, 2006 as compared to the corresponding period in 2005 as a
result of reduced sales at the end of the quarter.

Accounts receivable decreased for the quarter ended September 30, 2006 as
compared to the same period in 2005 as a result of the decreased level of sales.
Cash levels increased in the three months ended September 30, 2006 as compared
to the same period in 2005, as lower amounts of funds were used to finance
hardware sales. Accounts payable decreased in the first quarter of fiscal 2007
as compared to the same quarter in fiscal 2006 as a direct result of the
decrease in inventory at the end of the quarter.

Management continues its efforts to control administrative and personnel related
costs.

Interest income, not a material source of income, increased in the September
2006 quarter as compared to 2005 primarily due to higher rates of return on
invested funds.


IMPACT OF INFLATION

The effects of inflation on our operations were not significant during the
periods presented.


                                                                              10

<PAGE>


CONTRACTUAL OBLIGATIONS
<TABLE>
<CAPTION>

                                                Less than            1-3            4-5       More than
Contractual Obligations            Total         One Year          Years          Years         5 Years
-----------------------            -----         --------          -----          -----         -------

<S>                              <C>             <C>              <C>            <C>                  <C>
Real Estate Lease                $819,756        $139,204         $371,210       $309,342             --

Office Equipment                 $  4,161        $  4,161               --             --             --

</TABLE>


CRITICAL ACCOUNTING POLICIES

The Corporation's financial statements are prepared in accordance with
accounting principles that are generally accepted in the United States. The
methods, estimates, and judgments used in applying these most critical
accounting policies have a significant impact on the results reported in the
financial statements. The Securities and Exchange Commission has defined
critical accounting policies as policies that involve critical accounting
estimates that require (a) management to make assumptions that are highly
uncertain at the time the estimate is made and (b) different estimates that
could have been reasonably used for the current period, or changes in the
estimates that are reasonably likely to occur from period to period, which would
have a material impact on the presentation of our financial condition, changes
in financial condition or in result of operations. Based on this definition, the
most critical policies include: revenue recognition, allowance for doubtful
accounts, and valuation of deferred tax assets.

Revenue Recognition
-------------------
Revenues related to our equipment sales are recognized when evidence of an
arrangement exists, delivery of equipment has occurred, the sales price of the
equipment being sold to our customers is both fixed and determinable and
collectability of the accounts receivable related to the equipment sale is
reasonably assured in accordance with SEC Staff Accounting Bulletin No. 104
Topic 13.

Revenues related to our services are recognized as the service is performed
using the percentage of completion method of accounting under which the total
contract revenue during the term of an agreement is recognized on the basis of
the percentage that each contract's proportional performance to date bears to
the total completion of performance. Estimates of proportional performance are
continuously monitored during the term of the contract, and recorded revenues
and costs are subject to revision as the contract progresses.

Accounts Receivable
-------------------
Accounts receivable are reported at their outstanding unpaid principal balances
reduced by an allowance for doubtful accounts, based on certain percentages of
aged receivables. We estimate doubtful accounts based on historical bad debts,
factors related to specific customers' ability to pay and current economic
trends.

Valuation of Deferred Tax Assets
--------------------------------
At September 30, 2006, we have a valuation allowance of approximately $1,334,998
primarily to reduce our net operating loss carryforwards of $3,425,000 to an
amount that will more likely than not be realized. These net operating loss
carryforwards have varying carryforward periods and restrictions on usage. The
estimation of future taxable income and our resulting ability to utilize net
operating loss and tax credit carryforwards can significantly change based on
future events, including our determinations as to the feasibility of certain tax
planning strategies. Thus, recorded valuation allowances may be subject to
material future changes.


                                                                              11

<PAGE>


INVESTMENT CONSIDERATIONS AND UNCERTAINTIES

THE MATTERS DISCUSSED IN MANAGEMENT'S DISCUSSION AND ANALYSIS AND THROUGHOUT
THIS REPORT THAT ARE FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT MANAGEMENT
EXPECTATIONS THAT INVOLVE RISK AND UNCERTAINTIES. POTENTIAL RISKS AND
UNCERTAINTIES INCLUDE, WITHOUT LIMITATION: THE IMPACT OF ECONOMIC CONDITIONS
GENERALLY AND IN THE INDUSTRY FOR MICROCOMPUTER PRODUCTS AND SERVICES;
DEPENDENCE ON KEY VENDORS AND CUSTOMERS; CONTINUED COMPETITIVE AND PRICING
PRESSURES IN THE INDUSTRY; PRODUCT SUPPLY SHORTAGES; OPEN-SOURCING OF PRODUCTS
OF VENDORS, INCLUDING DIRECT SALES BY MANUFACTURERS; RAPID PRODUCT IMPROVEMENT
AND TECHNOLOGICAL CHANGE, SHORT PRODUCT LIFE CYCLES AND RESULTING OBSOLESCENCE
RISKS; TECHNOLOGICAL DEVELOPMENTS; CAPITAL AND FINANCING AVAILABILITY; AND OTHER
RISKS SET FORTH HEREIN.


                                                                              12

<PAGE>


ITEM 4.  CONTROL AND PROCEDURES

The Chief Executive Officer and Chief Financial Officer of the Corporation have
concluded, based on their evaluation as of September 30, 2006, that the
Corporation's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Corporation in the reports filed or
submitted by it under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and include controls and
procedures designed to ensure that information required to be disclosed by the
Corporation in such reports is accumulated and communicated to the Corporation's
management, including the Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in the Corporation's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of such evaluation.


                                                                              13

<PAGE>


                                     PART II
                                OTHER INFORMATION
                                -----------------

ITEM 6:  EXHIBITS AND REPORTS ON FORM 8-K

         A. Exhibits -
             31.1 Certification required by Section 302
             31.2 Certification required by Section 302
             32   Certification required by Section 906

         B. Reports on Form 8-K -
              On September 28, 2006, TransNet Corporation filed a Form 8-K under
                Item 7.

                                   SIGNATURES
                                   ----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                    TRANSNET CORPORATION
                                    (Registrant)


                                    /s/ Steven J. Wilk
                                    --------------------------------------
                                    Steven J. Wilk, President and
                                    Chief Executive Officer


                                    /s/ John J. Wilk
                                    --------------------------------------
                                    John J. Wilk,
                                    Principal Financial and Accounting Officer
                                    and Chairman of the Board of Directors



DATE:  November 14, 2006


                                                                              14